There are many challenges in divorce which can affect every aspect of your life. For some, divorce can be a fresh start putting the past behind you and allowing you to move on. After a divorce, and aside from parental responsibilities, any financial, personal and career decisions are your own to make.
In the divorce process, a settlement and final order should be very thorough, requiring a divorcing couple to review all assets and financial accounts as you divide them. Even once the paperwork is signed and you’ve moved on, there may be certain items that were overlooked. It is important to address any loose ends. One especially important issue is designating beneficiaries.
Out of sight, out of mind
Once people sign up for insurance, they rarely review the policy instead filing it away. But after a divorce, you need to revisit your beneficiary designations. Make sure that your beneficiary designations reflect what you actually want to happen should something happen to you. Many states, including Colorado, have laws to protect divorcees from this situation by voiding an ex-spouse’s beneficiary rights. Even so, you may encounter complications.
There is a pending Supreme Court cases about a similar law in Minnesota. The husband and wife divorced before the state law took effect. The husband never changed his beneficiary figuring that the law automatically overrode his selection. The lawsuit challenges whether a new law can retroactively change an existing contract – in this case, an insurance policy.
Protect yourself against uncertainty
The Minnesota case highlights just one possible scenario. The best way to protect your interests is to keep documentation up to date through any life changes. Even if you’ve addressed your divorce in your estate plan, a beneficiary designation can override your intent set forth in your will.
While it’s easy to forget about an insurance policy you obtained years, sometimes decades ago, those details are significant after a divorce. It is essential to review any beneficiary designations in order to make sure that the outcome reflects your wishes.